Likelihood to respond scores are used in a wide variety of customer
retention marketing programs. If you know how to use these customer
scoring methods, you will know the "guts" of how all the programs below
The following is not an attempt to dissect all the nuances of each
approach or all the sub-cultures inside each of them. There is some
overlap and similarity across all of them, and are listed in order of
Frequently used as a catch-all term, direct marketing really is the big
idea, the global reference to doing business with customers
directly. It takes many forms - catalogs, TV Shopping, DRTV,
infomercials, direct mail, cold-calling, the Internet, even matchbook
covers. Anytime you try to sell something directly to the end user
rather than going through some third-party distribution arrangement you
are doing direct marketing. Direct does not necessarily imply a
customer database, although there are usually some kind of transaction
records around - perhaps not actually in a "database."
Using the customer database to market to customers. Hmm. It can
mean you have a list of customers and mail stuff to them, perhaps without
doing any customer profiling at all.
This approach is often referred to as "direct marketing" - the
blasting out of mass communications to everyone on a list. In
reality, it is nothing more than mass or broadcast communications using a
personal media channel. True database marketing creates a feedback
loop where customer behavior is analyzed and taken into account when
designing the next communication. When no customization based on
profiles is done, it's really mass marketing. Any marketing approach
taking advantage of customization is
data-based marketing, so all the methods below would be included under the
database marketing umbrella. More...
"Punch card" marketing. If you buy 6 sandwiches, you
get the 7th free. Buy $100 worth of stuff and weíll
send you a $10 coupon. Here you are using the database to figure out
who isnít buying enough and try to get them to buy more. OK, I get
it. Itís really a crippled version of RFM, FM without the R, if
you will. Concepts like LTV and subsidy cost donít matter as much;
you just want them to buy more. These programs tend to generate HUGE
subsidy costs, because youíre always giving the most discounts to your
best customers. They are very common in offline retail, where the
effects on customer valuation are difficult to measure. Yuck.
Database marketing with a friendly, more intelligent face. Many
database marketing types just use the database as a list and mail things
to it; relationship marketing implies a deeper knowledge of the customer
and some kind of give and take. In relationship marketing, there is
acknowledgement of a customer LifeCycle, and marketing is viewed as a
rather than a series of seemingly unconnected events.
The process is usually defined as a series of customer stages, and
there are many different names given to these stages, depending on the
marketerís perspective and the type of business. For example,
working from the beginning of the relationship to the end of the
Interaction > Communication > Valuation > Termination
Awareness > Comparison > Transaction > Reinforcement >
Suspect > Prospect > Customer > Partner > Advocate >
During this process, you try to customize programs for individual
customer groups and the stage of the process they are going through; as
opposed to some forms of database marketing where everybody would get
virtually the same promotions, with perhaps a change in offer. The
stage in customer LifeCycle determines the approach used in
marketing. A simple example of this would be sending new customers a
"Welcome Kit." And in relationship marketing, you listen
to the data and try to hear what itís telling you. OK, if you
follow the techniques in the book, you are doing relationship
marketing, no doubt about it.
Keys to success in Relationship
Relationship marketing with a currency, a store of value that tries to
keep the customer "locked up" with a company. In well run
loyalty programs, customer profiling is used extensively to promote to
customers, except points are used instead of discounts as the incentive
for activity. Loyalty programs are expensive and difficult to do
right, but can be effective, as long as these things are true:
The rewards are desirable to the specific customer base.
Generic loyalty programs with blah awards almost always fail. If
youíre doing a sports loyalty program and you offer tickets to great
games instead of over-priced cameras for rewards, youíll do OK with
The program is kept fresh and exciting, with a constant variety of
things to involve the customer with, including refreshing of the rewards
catalog, point auctions, etc.
The marketing does not focus on ideas creating subsidy costs among
best customers. In the ideal world, you want to use points to
generate activity from low value customers, and you donít want your
high value customers spending down their points to zero all the
time. Some marketers encourage the opposite and bankrupt their
If you would like to see an example of a well run, extremely profitable
loyalty program in the consumer cellular area, click
Keys to success in Loyalty Programs
Relationship Marketing with a gentler hand on the communications
issues. Itís a superb idea, and concerns the protocol of
communication between a business and their customers over the LifeCycle.
Permission marketing states when communicating with customers, you should
be anticipated, be personal, and be relevant. The customerís
definition of these three ideas would naturally change over time, so you
have to listen to the customer and engage in
This has the effect of upgrading the quality of your customer base,
because in theory, only the people who really want something from you
grant permission. This is definitely solidly in the customer
profiling camp, where the focus is on improving the value of customers and
not spending money on customers who are not interested. Other than
communication protocols, customer profiling techniques would apply, as
long as you make sure you refresh and keep the permission.
Keys to success in Permission
One to One Marketing
Outlined in a 1993 book "The One to One Future"
by advertising guru Don Peppers and marketing scholar Martha Rogers,
Ph.D. The following 2 blurbs are from the book promotion:
"Most businesses follow time-honored mass-marketing rules of
pitching their products to the greatest number of people. But
selling more goods to fewer people is more efficient ó more
profitable. Welcome to a radically different business paradigm of 1
to1 production, marketing, and communication."
"The One to One Future" gives the best description
yet of life after mass marketing. A "1 to 1" competitor
focuses on share of customer ó one customer at a time ó rather than
just share of market, which is the Holy Grail of the mass marketer."
The One to One approach, as in relationship
marketing, is looked at as a process with
the customer. It follows their unique
IDIC methodology (Identify, Differentiate, Interact, Customize).
Hmmm. Selling more goods to fewer people is more efficient.
Sounds like focusing your resources on your highest potential customers,
and customizing your approach based on their profiles. Sort of like
what weíve talking about in this book all along.
Additionally, their idea is much bigger than just marketing; it is
about the entire business process. They would like companies to
literally design products and service for specific customers, instead of
creating a product and then trying to find people who want to buy
it. As a customer of a true 1 to 1 company, you would let the
company know what you need and they would provide it. This is the
"share of customer" idea in action.
In practice, the concept at this time, for most companies, comes down
to understanding what people want and marketing to them in a customized
way. Customer profiling is right up the 1-to-1 alley, because it
involves understanding behavior and reacting to it as an exchange with the
customer, back and forth.
Keys to success in 1-to-1 Marketing
(Customer Relationship Management)
In many ways CRM is the operational face of the 1-to-1 movement; CRM
represents the business philosophy required to accomplish the 1-to-1
Unfortunately, many people have come to equate CRM, which is really a
strategy, with the tools and software which allow a firm to execute the
strategy. Along those lines, CRM has been divided according to the
functionality of software tools:
Analytical CRM - the use of data modeling and profiling to accomplish
Collaborative CRM - the tools used to directly engage and interact with
Operational CRM - the "back end" systems which unify the
business and deliver products
Once again, in practice, few firms have the CRM idea working as well as
they would like. The problem is one of lacking experience in using
customer data to run a business. Many people had expectations they
could just "automate" their marketing, but working with customer
data requires experienced human input as well. It's a bottoms up,
not top down process; many companies who started at the top are finding
they should have gained experience using customer data with simple proven
methods "pre-CRM" before they took on
data mining and other very complex tasks. Put another way: they're
trying to get a Ph.D. without ever finishing high school. More...